Stock method for measuring and assigning precise meaning to market sentiment

ABSTRACT

A stock method for objectively quantifying the feeling, or market sentiment, of a company&#39;s stock (or the market as a whole) in a data-driven and transparent manner that serves as a standardized tool useful to investors and stock market analysts in gauging such items as inflated or deflated price values resulting from varying levels of market sentiment.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.11/680,877, filed Mar. 1, 2007, which is hereby incorporated byreference herein in its entirety.

FIELD OF THE INVENTION

The present invention relates to a standard quantification method forassigning precise meaning to the feeling, or market sentiment, ofcompany stocks and the stock market as a whole. More specifically, thepresent invention works by calculating such elements as a SentimentIndex and Sentiment Quotient, as well as applies these items to variousembodiments such as the Market Sentiment Curve, so that the overallsentiment of a stock in relation to price valuation and other factorscan ultimately be objectively quantified in a standardized andtransparent manner.

BACKGROUND OF THE INVENTION

The stock market is often a rough and tumble world full of volatilityand intrigue. The stock market is deeply intertwined with the nationaland international economic structure. On the individual investor level,people's hopes and dreams can rise and fall along with the unpredictabledirections of the stock market. For this reason, corporations andindividuals alike pay enormous sums of money to try and gain an edge inmaximizing profits through the stock market. As a result, numerouspeople are tasked with the job of trying to figure out which way themarket will turn for individual stocks on the market. A number of ideasand strategies have been funneled into the process of helping investorsdetermine the various scenarios surrounding their stocks. But in theend, these same practitioners are basically involved in what amounts toa high-stakes guessing game. In fact, since the Industrial Revolution,the ability of the average investor and other market participants topredict the vast idiosyncrasies of the stock market has largely beendriven by speculation. Numerous attempts and tools have been adoptedover the years to better predict what stocks will do, but to date, therehas been no reliable indicator to predict the rise and fall that goesalong with the stock market. Over the last 100 years, the U.S. capitalmarket has experienced nine crashes greater in magnitude than thecatastrophic market crash of 2000/2002. These market failures have beenoccasioned by what the Federal Reserve Chairman, Alan Greenspan, called“Irrational Exuberance”¹ and other market practitioners calledspeculative bubble. The expression of one's subjective feeling that themarket is driven by speculation has not been sufficient to protectinvestors. Prevailing theories—the Modern Portfolio Theory, theEfficient Market Hypothesis, etc—that underlie the discipline and thepractice of finance, and the workings of capital markets are no longertenable; they neither explain the behavior of markets nor do theyprovide information necessary for investors to make informed and soundinvestment decisions. These theories proved useless to investors whenthe broadest indicators of a diversified market lost vast percentages.Investors lost “70%, 90%, even in some cases all of their holdings”². Acrash of this magnitude is not an aberration; it is a pattern that hasrobbed millions of individuals of their life's savings for over acentury. The methods, processes, and tools that this invention embodiesmake a contribution to solving this problem by making availablestandardized and objective metrics and methods for quantifying andmeasuring market sentiment.¹http://www.federalreserve.gov/BOARDDOCS/SPEECHES/19961205.htm.²FortuneMagazine, Sep. 2, 2002, “You Bought, They Sold”

Information gap which increases the risk and volatility of the capitalmarket is another problem that the present invention is designed to makea contribution to solving. A large percentage of the more than 10,000companies traded on the U.S. stock market alone are not followed byanalysts. The lack of analysts researching these stocks presents a gapin reliable information that investors need in order to make informedinvestment decisions. The present invention satisfies these needs byproviding an efficient method of filling the gap with information on themarket valuation of stocks. With a tool for quickly and consistentlyquantifying the portion of a company's stock that is attributable tomarket sentiment in the hands of investors, they can effectively placedemands on research analysts to produce specific research informationthat supports or justifies the market valuation of companies traded onthe exchanges. For example, armed with information on the value of theportion of the company's stock that is attributable to market sentiment,investors can demand directly from a company's management information(financial, operations or market) that supports the company's valuation.Also, if the company does not satisfy requesters' demand for informationregarding possession of competitive advantage enabling it to sustain(for example) an above average Sentiment Quotient, then marketparticipants' demand for the company stock will fall. In that event, areduction in the demand for a company stock will have the effect ofoccasioning a drop in the price of the stock; a drop in the price of thestock will have an effect of reducing the risks associated with a stockmarket driven by speculative Bubble or Exuberance.

The metrics, processes, methods, and tools embodied in the presentinvention provide a new approach for investors to gain transparency andinsight into the market pricing of stocks. Instead of pure speculativeor otherwise traditional attempts at market analysis to solving theintractable problem of market failure, there is a need for amulti-disciplinary approach toward the stock market—one that employselements of accounting, finance, risk management, humanitarianismcombined with the discipline of systems and information engineering. Themethods introduced by the present invention satisfy the needs of marketparticipants by making available to society standardized, quantitativebenchmarks, and tools that have the utility of transforming the behaviorand improving the performance of capital markets in the U.S. and acrossthe world.

U.S. Pat. No. 6,415,268 issued to Korisch on Jul. 2, 2002, is a methodattempting to determine the “real” value of a stock by dividing certainstock pricing data into two components. This method specificallyinvolves an analysis of the “real value of the stock” along with arandom function of time, which is referred to in that method as the“noise wave of a stock.” Unlike the present invention, the method ascreated by Korisch does not delve into a standardized indicator andmeasurement of market sentiment, but instead relies on less in-depth andmore typical items as the short-term fluctuations that can be attributedto such elements as short-term investors.

U.S. Pat. No. 6,832,211 issued to Thomas et al on Dec. 14, 2004, is amethod that relies on such tangible indicators as related totechnology-based elements. Unlike the present invention, this method ascreated by Thomas et al relies almost exclusively on suchtechnology-based valuation indicators as scientific research by thecompany in question, as well as the speed at which this companyinnovates and research and development links. The very nature of thismethod differs from the present invention because of the limits on whattype of company stock values can be applied based on thetechnology-based indication focus.

US 2002/0073017 published on Jun. 13, 2002, invented by Robertson, is amethod that seeks to employ historical data related to a particularstock in order to rapidly analyze the trading potential. Unlike thepresent invention, this method does not delve into the area of marketsentiment and instead relies on traditional information revolving aroundthe actual history of the stock to present two graphical displays.

US 2002/0116310A1 published on Aug. 22, 2002, invented by Cohen et al,is a method that utilizes a scoring technique to ultimately engage in anunlimited number of comparative stock analysis. Unlike the presentinvention, this method is primarily functioned to aid investors bycustomizing scoring criteria for each stock portfolio in an effort toscore the comparisons between differing stocks rather than an analysiscapability for one specific company stock. This method also does nottake into account market sentiment in its comparative analysis.

US 2003/0135445 published on Jul. 17, 2003, invented by Herz et al, is amethod seeking to aid investors in predicting elements of company stocksby using “natural language processing” to extract company informationfrom various online news sources. Unlike the present invention, thismethod does not delve into actual market sentiment and relatedindicators directly relevant to the stock price, but instead literallytakes information from online mediums to predict the stock market. Thismethod differs from the present invention in many ways, including thefact that, unlike the present invention, this method relies solely ononline media coverage to make its predictions.

US 2004/40133496 published on Jul. 8, 2004, invented by Hedquist, is amethod seeking to determine the health of both the stock market andindividual company stocks. Unlike the present invention, this methodrelies on such items as closing price compared to short and long-termmoving averages to quantify a health score for the market.

US 20050086150 published on Apr. 21, 2005, invented by Serpico et al, isa method that creates an algorithm in an attempt to make a veritablepoint system acting as filters to either encourage or discourage actionsregarding various company stocks. Unlike the present invention, thismethod attempts to employ a three-pronged filter system related tocertain technical indicators as opposed to such elements of the presentinvention including a Market Sentiment Curve.

While there are plenty of methods out there attempting to aid investorsin navigating the stock market, none of them satisfies the need for astandard, precise meaning to market sentiment as associated with thepresent invention. None of these previous methods permit an investor oranalyst to study the intensity of market sentiment on a company stock inan objective and standardized way as the methods of this inventionenable. Such methods that are included in the present invention as theMarket Sentiment Curve, along with the Sentiment Index, and SentimentQuotient, all are combined into a unique approach designed to ultimatelyimprove and make accessible quantifiable methodology to benefitinvestors.

As mentioned above, the stock market is a volatile and unpredictableelement of society that faces such related issues as bubble, euphoria,psychology, sentiment and even “irrational exuberance” as quoted byformer Federal Reserve Chairman Alan Greenspan. In addition, previousmethods have failed to specifically address the problem of marketvaluation of company stock in regard to portions that are not explainedby the current operating performance and associated risks of variouscompanies. Nothing out there allows investors the opportunity to useinformation about a company stock in order to determine the feeling, ormarket sentiment, surrounding that stock in an analytical, standardized,objective way as the methods that this invention do. The methods asprescribed in the present invention satisfies that need by providingstandard quantifications that can be used as a tool to ultimatelysupport determinations of price valuation relating to market sentiment.A standard, complete method designed to assign precise meaning to themarket sentiment of the stock market is not only needed, but alsonecessary for those who risk their finances in the stock market as wellas for those who desire transparency and strategy.

SUMMARY OF THE INVENTION

The present invention relates to a standard quantification method forassigning precise meaning to the feeling, or market sentiment, ofcompany stocks and the stock market as a whole. More specifically, thepresent invention works by calculating such elements as a SentimentIndex and Sentiment Quotient so that the intensity and overall sentimentof a stock in relation to transparent price valuation and other factorscan ultimately be studied through an interface called Market SentimentCurve.

The present invention provides objective standards, methods, andprocesses, and an interface—the Market Sentiment Curve—for quantifyingand assigning précised meaning to the feeling, or market sentiment, ofcompany stocks and the stock market as a whole. The invention utilizesvarious indicators to ultimately produce an objective and systematicquantification of the portion of a company's market valuation that isderived from market sentiment, or the feelings and expectations ofmarket participants. It also includes an additional embodiment forstandardizing the process of quantifying and classifying the marketvaluation of a company or the market as a whole as “Bubble,”“Exuberant,” or “Lethargic.” The present invention derives a number ofnew metrics for quantifying and measuring market sentiment, including 1.Sentiment Index (Si), 2. Sentiment Quotient (Sq), and 3. Change inSentiment Quotient (S_(qΔ)). Additionally, items such as price pershare, expected return and earnings per share are integral to themethods of the present invention. Together, these metrics objectivelyquantify and measure the portion of the market value (stock price) of acompany (or the market as a whole) that is driven by speculations, not acompany's current operating performance.

These metrics and methods of the present invention all serve in part toenable investors and others involved in the stock market to makeinformed decisions within the confines of a standardized, objective,transparent and all-encompassing informational approach. In short, thepresent invention takes a number of factors into account and quantifiesthem into standard metrics. These calculations are then graphed on alogistic curve—The Market Sentiment Curve—so that the feeling, orsentiment, surrounding the stock market or individual stock is depicted.Once a point is plotted based on the Sentiment Index for the graph'shorizontal axis and the Sentiment Quotient for the vertical axis, theintensity of market sentiment relating to a stock can be studied. Thenumbers gleaned from this method can provide standardized results thatcould serve as an objective basis for the analysis of such items asprice valuation and price inflation or deflation due to high or lowsentiment or feeling.

In addition, the indicators of the present invention provide a method ofunderstanding and interpreting the market value of company stocks. TheMarket Sentiment Curve is a key element of the present invention. TheMarket Sentiment Curve is designed to quickly interpret the valuationindicators and ultimately make them available to investors. Plotting thecoordinate of the Sentiment Index and the Sentiment Quotient derives theMarket Sentiment Curve. In essence, the points on the Market SentimentCurve can be plotted on a minute-by-minute basis, year-to-year or anyother time frame that best fits the needs of the individual investor oranalyst.

The present invention has various items that serve to obtain usefulelements relating to market sentiment. Again, this includes price pershare, rate of return and earning per share among other factors. Theseindicators then can be used to determine the Sentiment Index. TheSentiment Index is a standardized indicator and measure of marketsentiment toward a company's stock market price. In addition, the marketvalue partitioning factor, here known as the Sentiment Quotient, is astandardized measure of the portion of a company's stock market pricethat is attributable to market sentiment.

Once the calculations of each of these items are made, the resultsrelating to the Sentiment Index and Sentiment Quotient can be used tostudy the sentiment of the stock. As noted above, the Sentiment Index isplotted using the horizontal axis and the Sentiment Quotient is plottedusing the vertical axis. Based on the results and course of time, acurve will appear on the graph. This curve is used to visually display aquantification of the feeling, or market sentiment, surrounding stockson the stock market. Investors and others involved in the stock marketcan then use the graph and results of the present invention tounderstand the feeling surrounding a company stock instead of merelyrelying on typical intangibles. The points on the graph based on theresults gained from the Sentiment Index and Sentiment Quotient indicatesthe intensity of the market sentiment. In general, a lukewarm result mayindicate to an investor that a company stock price has good percentageof value in its price due to the lack of inflation attributed to marketsentiment. Conversely, a high result could reveal that the price valueof a stock is inflated due to strong feelings associated to the stock.The present invention is designed to quantify and standardize this vitalaspect to better assist investors, analysts and anyone else associatedwith the stock market.

The metrics and methods that the present invention embodies are designedto be applied to the stock market as a whole, market sectors,industries, and individual securities traded on stock exchanges in theUnited States and other capital markets across the world. The presentinvention derives the following metrics for quantifying and measuringmarket sentiment: 1) Sentiment Index (Si), 2) Sentiment Quotient (Sq),and 3) Change in Sentiment Quotient (S_(qΔ)). Together, these metricsobjectively standardize the process for quantifying and measuring theportion of the market value (stock price) of a company (or the market asa whole) that is driven by speculations, not a company's currentoperating performance.

The mathematical formulas for the present invention provide a method toultimately standardize the process for quantifying and the measuringmarket sentiment through such embodiments as the Market Sentiment Curve.

Below is the mathematical formulation of Sentiment Index at a point intime:

$S_{i} = \frac{{{Pps} \times r} - {Eps}}{Eps}$

Below is the mathematical formulation of the Sentiment Quotient at apoint in time:

$S_{q} = {\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{s_{i}}}}$

Below is the mathematical formulation of the Change in SentimentQuotient over time:

$S_{q\; \Delta} = {\int_{S_{i}{({TimeA})}}^{S_{i}{({{Time}\; B})}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{s_{i}}}}$

The metrics of the present invention also include mathematical formulasthat ultimately lead to various algorithms that can be applied toadditional embodiments of the present invention.

$\begin{matrix}{{Bubble} = {\left\lbrack {\left( \frac{{{PPS} \times r} - {Eps}}{Eps} \right) > \left( {{Profit}\; \Delta_{YtoY}} \right)} \right\rbrack \mspace{14mu} {{AND}\mspace{11mu} \mspace{391mu}\left\lbrack {{\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{s_{i}}}}>=0.5} \right\rbrack}}} & {{Formula}\mspace{14mu} 1} \\{{Exuberant} = {\left\lbrack {\left( \frac{{{PPS} \times r} - {Eps}}{Eps} \right) > \left( {{Profit}\; \Delta_{YtoY}} \right)} \right\rbrack \mspace{14mu} {{AND}\mspace{11mu} \mspace{410mu}\left\lbrack {{\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{s_{i}}}}>=0} \right\rbrack}}} & {{Formula}\mspace{14mu} 2} \\{{Lethagic} = {\left\lbrack {\left( \frac{{{PPS} \times r} - {Eps}}{Eps} \right) < \left( {{Profit}\; \Delta_{YtoY}} \right)} \right\rbrack \mspace{14mu} {{AND}\mspace{14mu} \mspace{425mu}\left\lbrack {{\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{s_{i}}}} < 0} \right\rbrack}}} & {{Formula}\mspace{14mu} 3}\end{matrix}$

Where

-   -   PPS=Price per Share. The method obtains PPS (Price per Share)        from publicly available market data.    -   EPS=Earning Per Share. The method uses available EPS (Earning        per Share) data provided by audited financial statements, under        Generally Acceptable Accounting Principal Standards.    -   r=Expected Return. The Capital Asset Pricing Model provides a        method for calculating “r”: r=r_(f)+β(m_(r)−r_(f))³ ³William        Sharpe (1964) published the capital asset pricing model (CAPM).        Parallel work also was performed by Treynor (1961) and Lintner        (1965). CAPM extended Harry Markowitz's portfolio theory to        introduce the notions of systematic and specific risk. For his        work on CAPM, Sharpe shared the 1990 Nobel Prize in Economics        with Harry Markowitz and Merton Miller        http://www.riskglossary.com/link/capital_asset_pricing_model.htm        -   Where:            -   r_(f)=risk free premium (t-bill rate);            -   m_(r)=average market return            -   β=Beta (a measure of systematic risk of a stock);

β=COV(i _(s) ,i _(m))/σ_(m) ²

-   -   -   -   -   Where:                -    COV (i_(s), i_(m))=Covariance between stock return,                    and market return                -    σ_(m)=Standard deviation of systematic return

    -   ProfitΔYtoY=Percent change in Corporate Profit over a year

The Sentiment Index is an objective, quantifiable method forcategorizing the market's sentiment towards a company as positive,negative or neutral at a point in time. The Sentiment Index alsostandardizes and quantifies the market's sentiment or expectation ofincrease in a company's operating performance (profit) built into acompany's stock market value at a point in time. The Sentiment Indexprovides an input to the calculation of the Sentiment Quotientassociated with the market valuation of a stock at a point in time

The Sentiment Quotient is a standardized metrics for objectivelyquantifying the fraction of a stock's price that is attributable tomarket sentiment or quantifying the sentiment value that the marketassociates with a company's stock price at a point in time. Meanwhile,the Sentiment Quotient Delta measures change in company's (or the marketas a whole, sector, etc) sentiment value that the market associates witha company's stock price over time. It is used to performed historicaland trend analysis.

An additional embodiment of this invention is the standardization andclassification of individual stocks or the market as a whole as“Bubble,” “Exuberant,” or “Lethargic.” The present invention uses themetrics described above to develop algorithms that:

-   -   Classifies the market valuation of a stock (the market as a        whole, Sector, Industry, or portfolios) as “Bubble,”        “Exuberant,” or “Lethargic”    -   Assigns appropriate color code

Below are the algorithms that the present invention uses to automate theclassification process:

-   -   If a company's Sentiment Index at a point in time is greater        than the company's actual percent increase in profit over a year        AND the company's Sentiment Quotient is greater than 0.5 than        the method classifies the market valuation of the company's        stock as “Bubble” and assigns a color code of “Red.”    -   If a company's Sentiment Index at a point in time is greater        than the company's actual percent increase in profit over a year        AND the company's Sentiment Quotient is greater than 0, than the        method classifies the market valuation of the company's stock as        “Exuberant” and assigns a color code of “Yellow.”    -   If a company's Sentiment Index at a point in time is less than        the company's actual percent increase in profit over a year AND        the company's Sentiment Quotient is less than 0, than the method        classifies the market valuation of the company's stock as        “Lethargic” and assigns a color code of “Green.”

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a general view of a Market Sentiment Curve as applied to thepresent invention.

FIG. 2 is a table relating to an additional embodiment of the presentinvention

FIG. 3 is an embodiment of the Market Sentiment Curve as applied to thepresent invention pertaining to an example using MICROSOFT™ stock.

FIG. 4 is an embodiment of the Market Sentiment Curve as applied to thepresent invention pertaining to an example using MOVADO™ stock.

FIG. 5 is an embodiment of the Market Sentiment Curve as applied to thepresent invention pertaining to an example using FANNIE MAE™ stock.

FIG. 6 is an embodiment of the Market Sentiment Curve as applied to thepresent invention pertaining to an example using TOLL BROTHERS™ stock.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT(S)

FIG. 1 shows a graph of the Market Sentiment Curve of the presentinvention. The Market Sentiment Curve is derived from the accumulationof various elements of data. This information is gleaned from itemsrelated to the company stock such as price per share, earnings pershare, risk and rate of returns. All of the information is broughttogether into quantifiable formulas, all relating to differing areas offeeling, or market sentiment. From there, a market sentiment index isderived. After the market Sentiment Index is calculated, the numberpertaining to the Sentiment Quotient is derived. Once these elements areworked out, the results are applied to the graph. The primary element ofthe present invention relates to the Sentiment Quotient and theSentiment Index. As seen in FIG. 1, the Sentiment Quotient is charted bythe vertical axis and the sentiment index is charted by the horizontalaxis. These two elements of the present invention are then plotted ontothe graph. The Market Sentiment Curve can then be studied andcontinuously plotted based on the individual needs of the investor oranalyst.

Whether it is part of the Market Sentiment Curve or simply to achievethe actual number for analysis, the Sentiment Index and SentimentQuotient contribute greatly to the method of the present invention. TheSentiment Index is an indicator of the portion of a company's stockprice that is attributable to market sentiment. The Sentiment Index isused to provide an objective indication and standard measure of variousstates of market feeling or sentiment toward a particular company stock.Such states of market sentiment include positive/optimistic feelings,neutral or negative/pessimistic feelings. As mentioned above, thesentiment index is comprised of many tangible factors such as price pershare and earnings per share.

Meanwhile, the Sentiment Quotient can also be regarded as a market valuepartitioning factor. The Sentiment Quotient is integral to the presentinvention in that it essentially is a quantification of a portion of acompany's market value that is attributed to market psychology orgeneral feeling or sentiment. The sentiment quotient is used inconjunction with the Sentiment Index to ultimately establish a standard,transparent and meaningful tool as prescribed by the present invention.Most importantly, the graphing or table representation of the sentimentindex versus the sentiment quotient, especially over time, is a subjectof the present invention.

The elements of the present invention and resulting Market SentimentCurve all serve to quantify the overall feeling of company stocks. Thisfeeling, known as market sentiment, provides investors and othersinvolved in the stock market with a standard, quantifiable method fromwhich to make their investment decisions or even to merely gaininformation on the company stock or market in general. Basically, thenumbers derived into the Market Sentiment Curve can be used to make aneducated, tangible investment decision.

When determining the Market Sentiment Curve, the first step when dealingwith a particular company stock is to calculate the Sentiment Index.That point will be plotted through the horizontal axis. The SentimentQuotient will then be derived and plotted on the vertical axis. Once thecompany stock is plotted on the graph, that positioning will enable theinvestor to learn a great deal about the price of the stock. Inaddition, these points can be plotted on a minute-to-minute basis ormonth-to-month depending on the needs of the investor. This makes thepresent invention viable to a day trader as much as for a market analystor traditional investor.

When studying the resultant Market Sentiment Curve as shown in FIG. 1,an investor can learn about the intensity of positive or negativefeelings surrounding a company stock. As the graph in FIG. 1 indicates,a Sentiment Quotient around −0.25 can be considered to have somewhatnegative feelings or sentiment. But over the course of time if we assumethe market reaction value curve followed the example in FIG. 1, then wecan see how the feelings or sentiment continue to increase. This exampletells us how an investor could view the stock as a good buy with littlevalue inflation due to sentiment until it ultimately reaches a SentimentQuotient of around 0.80. At that point, the stock price could be deemedvastly inflated in regard to sentiment and not such a good buy anymorein terms of value. Investors and analysts can study the graph to makethese determinations.

In addition to the Market Sentiment Curve, investors and others involvedin the stock market are not limited to plotting and graphing the resultsof the calculations. As seen in FIG. 2, the present invention creates astandard quantification of market sentiment through the Sentiment Indexand Sentiment Quotient. FIG. 2 shows us a standard table of the presentinvention that can be used similar to a common multiplication table onemight recall from elementary school math class. The table in FIG. 2 isan additional embodiment of the present invention that features allpotential results derived from the calculations for the Sentiment Indexand Sentiment Quotient. Similar as is done in the market value reactioncurve as seen in FIG. 1, the table in FIG. 2 is used by locating theSentiment Index of a company stock and then locating the correspondingSentiment Quotient of that company stock. The table in FIG. 2 thenbecomes an additional embodiment of the present invention where it canbe used to study the market sentiment of a stock in relation to suchitems as price valuation and the inflation and deflation of a companystock in direct relation to market sentiment. It should be recognizedthat calculating a Sentiment Index for the stock price is providing anumber based on the intensity of feeling that the user associates with aparticular stock.

While the user can use items such as that shown in FIG. 2, the user alsohas other options in regard to further technological and Web-basedembodiments of the present invention as seen in FIG. 1. The presentinvention, as indicated in FIG. 1, shows how the coordinate (the exactposition) of a company's Sentiment Index and its Sentiment Quotient lieson a logistic curve. The logistic curve—Market Sentiment Curve—derivedby plotting the Sentiment Index and the Sentiment Quotient, is aninterface of the present invention developed to give the user acomposite and simple device for using the metrics and methods of thepresent invention to quickly gain insights that would lead to a moreinformed investment decision. To use this tool as shown in FIG. 1, theuser can access a web-based application; the user then would enter theticker symbol of the company of interest or click on a pull-down menuand select the ticker symbol that he/she would like to gain insightinto. Valuation metrics associated with the ticker symbol selected bythe user is displayed on the Curve. The application that supports theMarket Sentiment Curve as shown in FIG. 1 of the present invention hasembedded in it the logic for accessing, summarizing, and presenting themetrics described in the present invention at the user's request.Web-based tools such as XML, Web-services and agent applications canthen enable the application.

FIGS. 3, 4, 5 and 6 are additional embodiments of the present invention.FIGS. 3, 4, 5 and 6 use the scenario below to illustrate the utility ofthe valuation metric and Market Sentiment Curve. The following is anexample of additional embodiments of the present invention applied torealistic, practical scenarios:

Assume that today is Jan. 6, 2006, and you are contemplating making aninvestment in the following companies: MICROSOFT™, MOVADO™, FANNIE MAE™,and TOLL BROTHERS™. You have a feeling about the market valuation ofthese companies, but before making a decision whether or not to buythese company stocks, you would like to obtain analysis that is free ofbias. You read the financial press and analysts have different opinionsabout the valuation and prospects of these companies. You need objectiveinformation that would give you insight into the valuation of thesecompanies. Analyst reports, even if available, are expensive and in somecases biased. You decide to use the valuation methods and MarketSentiment Curve of the present invention to quickly analyze thesesecurities in order to make informed investment decision.

In regard to FIG. 3, you access the Market Sentiment Curve over theInternet. You click on a pull-down menu on the Market Sentiment Curveand select MICROSOFT's™ ticker symbol. The following information appearson the curve: Price Per Share (Pps): $26.92; Sentiment Index (Si): 1.65;Sentiment Quotient (Sq): 0.62 and profit growth over one year (CpΔ):0.49. As these metrics appear on the Curve, the following analysis andinterpretation are automatically displayed:

-   -   A Sentiment Index of 1.65 indicating that the market's sentiment        towards MICROSOFT™ is POSITIVE.    -   A Sentiment Index of 1.65 also means that priced into        MICROSOFT's™ stock is a market expectation that MICROSOFT's™        operating performance (Profit) will increase by 165% over a        year.    -   A Sentiment Quotient of 0.65 means that 65% of the current stock        price is derived from Market Sentiment.    -   MICROSOFT™ actual one year profit growth is 49%    -   Considering that the Si (1.65) is greater than its profit growth        (0.49) AND its Sq (0.62) is greater than 0.5, the current market        value is classified as BUBBLE and a color code of RED is        assigned.

Clicking on the buttons on the lower right hand corner of the MarketSentiment Curve will give you the ability to view the valuation metricsfor the market as a whole, and the sector and industry with whichMICROSOFT™ is associated. The Market Sentiment Curve also gives you theability to do historical analysis and gain insight from trend analysis.The application as applied to the present invention automaticallydisplays the metrics, analysis, and classifications when you click onone of the buttons.

Continuing this example onto the view in FIG. 4, you access the MarketSentiment Curve over the Internet. You click on a pull-down menu on theCurve and select MOVADO's™ ticker symbol. The following informationappears on the curve: Price Per Share (Pps): $19.03; Sentiment Index(Si): 0.67; Sentiment Quotient (Sq): 0.40 and profit growth over oneyear (CpΔ): 0.116. As these metrics appear on the Market SentimentCurve, the following analysis and interpretation are automaticallydisplayed:

-   -   A Sentiment Index of 0.67 indicating that the market's sentiment        towards MOVADO™ is POSITIVE.    -   A Sentiment Index of 0.67 also means that priced into MOVADO's™        stock is a market expectation that MOVADO's™ operating        performance (Profit) will increase by 67% over a year.    -   A Sentiment Quotient of 0.40 means that 40% of the company's        current stock price is derived from Market Sentiment.    -   MOVADO™ actual one year profit growth is 11.6%    -   Considering that the company's Si (0.67) is greater than its        profit growth (0.116) AND its Sq (0.40) is greater than 0, the        current market value is classified as EXUBERANT and a color code        of YELLOW is assigned.

Clicking on the buttons on the lower right hand corner of the MarketSentiment Curve will give you the ability to view the valuation metricsfor the market as a whole, and the sector and industry with whichMOVADO™ is associated. The Market Sentiment Curve also gives you theability to do historical analysis and gain insight from trend analysis.The application automatically displays the metrics, analysis, andclassifications when you click on one of the buttons.

In regard to FIG. 5, you may access the Market Sentiment Curve over theInternet. You click on a pull-down menu on the Curve and select FANNIEMAE™ ticker symbol. The following information appears on the curve:Price Per Share (Pps): $53.80; Sentiment Index (Si): −0.30; SentimentQuotient (Sq): −0.43 and profit growth over one year (CpΔ): 0.749. Asthese metrics appear on the Market Sentiment Curve, the followinganalysis and interpretations are automatically displayed:

-   -   A Sentiment Index of −0.30 indicating that the market's        sentiment toward the company is NEGATIVE.    -   A Sentiment Index of −0.30 also means that priced into the        company's stock is a market expectation that FANNIE MAE's™        operating performance (Profit) will decrease by 30% over a year.    -   A Sentiment Quotient of −0.43 means that 43% of Market Sentiment        value is not reflected in the company's current stock price.    -   FANNIE MAE™ actual one year profit growth is 74.9%    -   Considering that the company's Si (−0.30) is greater than its        profit growth (0.749) AND its Sq (−0.43) is less than 0, the        company's current market value is classified as LETHARGIC and a        color code of GREEN is assigned.

Clicking on the buttons on the lower right hand corner of the MarketSentiment Curve will give you the ability to view the valuation metricsfor the market as a whole, and the sector and industry with which thecompany is associated. The Market Sentiment Curve also gives you theability to do historical analysis and gain insight from trend analysis.The application automatically displays the metrics, analysis, andclassifications when you click on one of the buttons.

In regard to FIG. 6 of the present invention, you may access the MarketSentiment Curve over the Internet. You click on a pull-down menu on theCurve and select TOLL BROTHERS'™ ticker symbol. The followinginformation appears on the curve: Price Per Share (Pps): $37.23;Sentiment Index (Si): −0.13; Sentiment Quotient (Sq): −0.15 and profitgrowth over one year (CpΔ): 0.902. As these metrics appear on the MarketSentiment Curve, the following analysis and interpretation areautomatically displayed:

-   -   A Sentiment Index of −0.13 indicating that the market's        sentiment toward the company is NEGATIVE.    -   A Sentiment Index of −0.13 also means that priced into the        company's stock is a market expectation that TOLL BROTHERS'™        operating performance (Profit) will decrease by 13% over a year.    -   A Sentiment Quotient of −0.15 means that 15% of Market Sentiment        value is not reflected in the company's current stock price.    -   TOLL BROTHERS™ actual one year profit growth is 90.2%    -   Considering that the company's Si (−0.13) is greater than its        profit growth (0.902) AND its Sq (−0.15) is less than 0, TOLL        BROTHERS'™ current market value is classified as LETHARGIC and a        color code of GREEN is assigned.

Clicking on the buttons on the lower right hand corner of the MarketSentiment Curve will give you the ability to view the valuation metricsfor the market as a whole, and the sector and industry with which thecompany is associated. The Market Sentiment Curve also gives you theability to do historical analysis and gain insight from trend analysis.The application automatically displays the metrics and analysis when youclick on one of the buttons.

The present invention is not solely limited to the embodiments describedabove, but is also all variations, as well as those embodiments withinthe scope of the following claims.

1. A method for understanding a stock price for a company, comprising:obtaining data pertaining to the company; calculating a Sentiment Indexfor the stock price; and calculating a Sentiment Quotient for the stockprice; making an investment decision based on the Sentiment Quotient. 2.The method of claim 1, wherein said obtaining data pertaining to thecompany is operating information available about the company.
 3. Themethod of claim 1, wherein said calculating a Sentiment Index for thestock price is multiplying the price per share and rate of return minusthe earnings per share and divided by price per share.
 4. The method ofclaim 1, wherein said calculating a Sentiment Quotient for the stockprice is$S_{q} = {\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{{s_{i}}.}}}$5. The method of claim 2, wherein said calculating a Sentiment Index forthe stock price is multiplying the price per share and rate of returnminus the earnings per share and divided by price per share.
 6. Themethod of claim 2, wherein said calculating a Sentiment Quotient for thestock price is$S_{q} = {\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{{s_{i}}.}}}$7. The method of claim 3, wherein said calculating a sentiment quotientfor the stock price is$S_{q} = {\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{{s_{i}}.}}}$8. The method of claim 1, further comprising graphing the SentimentIndex versus the Sentiment Quotient.
 9. The method of claim 2, furthercomprising graphing the Sentiment Index versus the Sentiment Quotient.10. The method of claim 3, further comprising graphing the SentimentIndex versus the Sentiment Quotient.
 11. The method of claim 4, furthercomprising graphing the Sentiment Index versus the Sentiment Quotient.12. The method of claim 5, further comprising graphing the SentimentIndex versus the Sentiment Quotient.
 13. The method of claim 6, furthercomprising graphing the Sentiment Index versus the Sentiment Quotient.14. The method of claim 7, further comprising graphing the SentimentIndex versus the Sentiment Quotient.
 15. The method of claim 1, furthercomprising determining the Sentiment Quotient versus time.
 16. Themethod of claim 2, further comprising determining the sentiment quotientversus time.
 17. The method of claim 3, further comprising determiningthe sentiment quotient versus time.
 18. The method of claim 4, furthercomprising determining the Sentiment Quotient versus time.
 19. Themethod of claim 8, further comprising determining the Sentiment Quotientversus time.
 20. A method for understanding a stock price for a company,comprising: obtaining data pertaining to the company; calculating aSentiment Index for the stock price; calculating a Sentiment Quotientfor the stock price; wherein said obtaining data pertaining to thecompany is operating information available about the company; whereinsaid calculating a Sentiment Index for the stock price is multiplyingthe price per share and rate of return minus the earnings per share anddivided by price per share. wherein said calculating a SentimentQuotient for the stock price${S_{q} = {\int_{0}^{S_{i}}{\frac{1}{\left( {s_{i} + 1} \right)^{2}}{s_{i}}}}};$and making an investment decision based on the Sentiment Quotient.